Say I ran a pizza store and I pay my employees, Jennifer and John, $7.50 an hour, above the minimum wage and a wage we had agreed on. Also, say the raw material cost for pizza is $7.50, and I sell the pizza for $10.00. Jennifer and John make 10 pizzas per hour. Every hour, the pizza shop will make $100. After raw materials ($75.00) and labor ($15.00), I make $10.00 per hour. This does not include paying rent on the building and utilities, but we will ignore those expenses for now. I work each of them 30 hours a week, and they each make $225 a week. That results in a yearly salary of $11,700. Our company is going well, but then the government decides the minimum wage should go to $10.10 an hour. Now I only make $4.80 an hour. This is not a living wage for me, is it? So I have to raise my price on pizza to counterbalance the labor cost. The new pizza price is $13.00. But due to this, I now only sell 8 pizza an hour, even though Jennifer and John can make 10. I now make a profit of $8.80 an …show more content…
There is a correlation between the two. Many will say that the employment rate happened due to the 2008-2009 recession. While this may have to do with the jump, it isn’t the whole reason. In an article by the Cato Institute, it is said that the “island’s median income is 40% of the mainland’s… and 28% of the people make less than $8.50 an hour.” If this were the case on the mainland U.S., it would be equal to a minimum wage of $19.00 an hour. (2) The problem with the minimum wage is when it is higher than the GDP will allow. If there was no minimum wage, then the wages of employees would be directly related to the profits of the company, not to what the government thinks service is worth. Another example of job loss can be seen in Seattle. After they passed a law to slowly increase the minimum wage to $15.00 an hour. In a study done by The American Enterprise Institute, the number of restaurant jobs was down -700 compared to the statewide increase of +5,800. This is the first time since the 2008-2009 recession that the number of restaurant jobs has decreased. This shows a direct correlation between wages and employment. The graphs of this can be seen below in Figure